Overlooked market gets noticed

Federal Reserve Bank of St. Louis - Regional Economist, Apr 1999 by Tully, Jeryldine

In 1990, when the city of Evansville formed an economic development agency to breathe life into the area's economy, it decided to name the organization "Vision 2000." Back then, theYear 2000 seemed like a long way off, and the vision was a loosely defined one: to attract new business to the southwestern Indiana counties of Vanderburgh, Warrick, Posey and Gibson. "At that time, we were struggling to be somebody,"explains Ken Robinson, Vision 2000's executive director.

Nine years later, the vision is becoming a reality. In the past three years alone, the Evansville area has seen almost $3 billion in investment from a range of new developments, including:l

* Toyota Motor Manufacturing Corp. opened a $1.2 billion plant in Gibson County, 25 miles north of Evansville.

* AK Steel opened a $1.1 billion processing complex in Spencer County, 35 miles east of the city.

* Casino Aztar opened a $120 million 250-room hotel and casino complex downtown on the Ohio riverfront.

* In addition, ConAgra Inc. plans to construct a $225 million soybean processing plant in Posey County that would begin production by the spring of 2000.2

The Toyota plant is clearly the feather in the area's cap. It's one of only two Toyota vehicle manufacturing sites in the United States (the other is in Georgetown, Ky.).3 Moreover, the plant is designed to produce two brand-new Toyota vehicles: a full-size pickup truck called the Tundra, which will be available for sale in early June, and a sport utility vehicle, which will begin production in late 2000. At full tilt, the plant will employ 2,300 workers, who will (with a little help from robots) produce 150,000 vehicles a year.

The fact that Toyota-the secondlargest automobile manufacturer in the world-picked the Evansville area (specifically Princeton, Ind.) for its new facility begs the question, why?

The Toyota Tale

Mike Goss, public affairs manager at the Princeton site, says that the presence of the Georgetown plant just 200 miles away was a key factor in the company's decision.4 Particularly influential, Goss says, was the Midwest's well-developed automotive supply network, which is buoyed by the Georgetown plant.

The remaining reasons for Toyota's decision are echoed by other area companies:

* a good geographical locationEvansville is roughly 230 miles away from the median center of the U.S. population, making it a logical distribution point;

* a good transportation networkEvansville is accessible by Interstates 64 and 164 and Route 41. It has four major railroads, two ports on the Ohio River and a new airport, which is serviced by five major carriers;

* a good work force-Residents in the Evansville area are regarded as hard workers by current and prospective employers. Although there is no way to quantify this contention, some attribute it to the agricultural work ethic that prevails.

But if these factors are responsible for Evansville's recent economic success, why didn't they help out in the 1980s, when the area's (then) major employer, Whirlpool Corp., closed one of its two Evansville plants, BristolMyers Squibb moved its headquarters from Evansville to Princeton, N.J., and the unemployment rate was almost twice what it is now (see table)?

According to Robinson of Vision, it was only a matter of time before companies took notice of Evansville's natural assets. "We had been an overlooked market for some time,"he says. "Other markets [nearby] were saturating."

Mike Hinton, president of Old National Bank in Evansville, says the apparent explosion in Evansville's economy of late is actually the result of a long trial and error period. "What appears to be sudden is not so sudden," Hinton says. The city began considering a riverboat casino, he says, only after it was unsuccessful in several other attempts to jumpstart the economy. "It just happened to hit at the same time," he explains.

Gale Blalock, economics professor at the University of Evansville, says that after losing focus for a decade or so, the area appears to have gotten back on track. In the aftermath of the Whirlpool layoffs, Blalock says, residents feared that the area-once an archetypical smokestack economy-would turn into a service-based economy. With the arrival of Toyota and AK Steel, he says, "We're back to making things, and I think we like that."

Be Careful What You Wish For

Now that the Evansville area is experiencing solid economic growth, the city's attention is on how to sustain it. Labor market concernsspecifically, the availability of enough workers who are trained in the skilled trades-have become critical. "Work force development is a major issue for this community, and it will bring everything else to a screeching halt if we can't supply it," says Hinton of Old National Bank.

While Robinson admits that Evansville lost a prospective company recently because of work force issues, he believes that people will move to Evansville from less-robust areas like southern Illinois once word about job availability spreads. He also recently hired a consulting firm to uncover the number of underemployed persons in the metro area. According to the firm's report, approximately one-third of the area's labor force is underemployed.